Corporate income tax settlement involving related-party transactions is one of the key areas that businesses need to pay special attention to during the tax filing period, especially as tax authorities are stepping up transfer pricing audits using digital monitoring systems and AI-driven data analysis. Accurately identifying related-party relationships, fully completing the required schedules, controlling interest expense in accordance with the 30% EBITDA regulation, and preparing documentation to determine transfer prices in compliance with standards not only helps businesses comply with the law but also minimizes the risk of tax assessments, back taxes, and administrative penalties. The article below provides in-depth guidance, the latest legal updates, and important considerations to help businesses proactively manage their tax settlement process.
Legal Basis and Entities Required to File Corporate Income Tax Returns for Related-Party Transactions
To ensure accuracy, all content in this article is based on the following documents:
- Tax Administration Law No. 38/2019/QH14.
- Decree 132/2020/ND-CP: Core Document on Related-Party Transactions).
- Decree 125/2020/ND-CP: Regulations on Administrative Penalties for Tax and Invoice Violations).
- Circular 80/2021/TT-BTC: Guidelines for the Implementation of the Tax Administration Law.
Identify related parties
In 2026, the tax authority will place special emphasis on related-party transactions involving borrowed capital. Businesses should take note of the following thresholds:
- 25% Ownership Threshold: One party directly or indirectly holds at least 25% of the other party’s capital contribution.
- Control Threshold: A party that holds control, directly manages, or appoints more than 50% members of the supervisory board or executive board.
- Borrowing Relationships (Point d, Paragraph 2): This is the most common scenario that causes a business to be subject to corporate income tax settlement involving related-party transactions. If a business lends at least 25% of the owner’s capital contribution and accounts for more than 50% of the total value of the borrowing business’s medium- and long-term debt, both will be considered related parties.
See details: Forms of related-party transactions.
Key Types of Related-Party Transactions
Affiliate transactions involve more than just the buying and selling of goods; they also include:
- Loans, loan guarantees, or internal financial assistance.
- Transfer and lease of tangible and intangible assets (trademarks, technology).
- Provide management services, technical support, training, and cost-sharing services within the group.
Note: Starting in 2026, the tax authority will specifically scrutinize loans from directors, executives, or family-related parties to identify affiliated relationships.
Reference: Is taking out a bank loan considered a related-party transaction?.
Obligation to File Corporate Income Tax Returns for Related-Party Transactions
At the end of the fiscal year, businesses that have engaged in related-party transactions must submit a set of reporting documents consisting of four schedules attached to the corporate income tax final return (Form 03/TNDN) in accordance with Circular 80/2021/TT-BTC, specifically:
- Appendix I: Disclosure of Information on the Company, Affiliates, and Transaction Values.
- Appendix II and Appendix III: Preparation of the national transfer pricing documentation and the global documentation. Businesses must keep these documents on file at their offices in case of an audit or inspection.
- Appendix IV: International Profit Report (for large corporations).
Completing the schedules requires consistency between the figures in the books and those on the tax returns. To follow the technical procedures correctly, corporate accountants need to thoroughly understand how to Declare related-party transactions on HTKK. to ensure data consistency before filing the corporate income tax return involving related-party transactions.
Cases Exempt from Filing a Dossier
A business is exempt from preparing a pricing determination file if:
- Revenue < 50 billion VND and total value of related-party transactions < 30 billion VND.
- An APA (Advance Pricing Agreement) has been signed.
- Businesses performing simple functions, with revenue < 200 billion VND and achieving a net profit margin (EBIT/Revenue) as follows, depending on the industry: Distribution (≥ 5%), Manufacturing (≥ 10%), Contract Manufacturing (≥ 15%).
See details: No related-party transaction documentation is required.
Penalties and Risks Associated with Corporate Income Tax Settlements Involving Related-Party Transactions
Violations involving related-party transactions are always subject to the highest penalties within the tax penalty range due to the serious nature of profit shifting. Pursuant to Decree No. 125/2020/ND-CP and Article 50 of the Tax Administration Law No. 38, businesses should note the following:
Penalties for Procedural Violations (Appendices and Documentation)
This is a risk that arises as soon as a business files a tax return with incomplete or incorrect information:
- Fine ranging from 8,000,000 VND to 15,000,000 VND: For failing to prepare an appendix or for preparing one with incomplete information as required by regulations.
- A fine of between 15,000,000 VND and 25,000,000 VND: For failing to prepare documentation to determine the price of related-party transactions or failing to produce such documentation upon request by the tax authority during an audit.
Penalties for incorrect reporting resulting in an underpayment of taxes
If the tax authority can prove that a related-party transaction reduces the corporate income tax liability:
- A fine of 20% shall be imposed on the amount of underreported tax or the amount of tax for which an exemption, reduction, or refund was granted in excess of the prescribed limit.
- Late Payment Penalty: Calculated at a rate of 0.03% per day on the amount of tax paid late.
In that case, the late payment penalty is determined as follows:
Late Payment Penalty = Amount of Back Taxes x 0.03% x Number of Days Late |
Tax Assessment Risk
This is the most serious risk for businesses. Under Article 50 of the Tax Administration Law, the tax authority has the right to assess the tax liability if a business violates the regulations on related-party transactions. When such an assessment is made:
- Loss of Autonomy: The tax authority will reject any expenses and transaction values that a business self-reports.
- Use of the industry database: The tax authorities will apply the profit margins of comparable businesses in the tax authorities’ industry database to determine the profit level for the non-compliant business. Typically, this margin is always higher than the actual profit achieved by the business.
- Deduction of Interest Expenses: If sufficient documentation is not provided, all interest expenses may be disallowed rather than being limited to 30% of EBITDA.
Optimal Strategies Before Filing Corporate Income Tax Returns Involving Related-Party Transactions
At MAN – Master Accountant Network, we don’t just provide related party transaction advisory services Pure and simple. MAN offers a comprehensive solution for tax management and related-party transactions, helping businesses:
- Transfer Pricing Risk Screening and Review: Assess the health of the internal accounting system; additionally, assist the accounting department in updating policies related to the Global Minimum Tax (Pillar Two) and identify high-risk related-party transactions that are susceptible to tax assessments.
- Preparing in-depth transfer pricing documentation: Highly persuasive benchmarking data, combined with the expertise and experience to present the case to tax authorities.
- Optimizing the borrowing cost structure: Advising on cash flow restructuring to maximize the 30% EBITDA threshold and take full advantage of the transitional interest expense rules, thereby easing the company’s cash flow and providing greater financial flexibility.
- Direct support in filing tax returns with tax authorities: Prepare a detailed report on the company’s financial status and reconcile data from previous years. Our team has extensive experience in filing tax returns and working with tax authorities, and we always strive to protect the company’s legitimate interests to the fullest extent possible.
A convincing corporate income tax return involving related-party transactions is not necessarily the one with the lowest reported tax liability, but rather the one that accurately reflects the company’s value.
Conclude
The corporate income tax settlement involving related-party transactions is not only a mandatory reporting obligation but also a comprehensive test of a company’s financial management capabilities, risk control, and transparency. As tax authorities increasingly leverage digital technology, big data analytics, and in-depth transfer pricing audits, even the smallest errors in identifying related parties, calculating EBITDA, or preparing transfer pricing documentation can lead to serious consequences such as back taxes, administrative penalties, or even tax assessments.
Therefore, businesses need to proactively review all related-party transactions at the start of the fiscal year, standardize their transfer pricing documentation, and ensure consistency among financial statements, tax returns, and supporting schedules. Early preparation not only helps minimize the risk of audits but also lays a solid foundation for a long-term tax management strategy.
If your business needs in-depth consulting on revenue settlement,Whether your company has related-party transactions, is preparing documentation to determine related-party transaction pricing, or is conducting a tax audit risk assessment, working alongside a team of experienced experts will help you save significant time and costs and minimize any violations that may arise during the year.
Contact MAN – Master Accountant Network for free support and advice!
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder and CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.
FAQs on Corporate Income Tax Settlement Involving Related-Party Transactions
Not all businesses engaged in related-party transactions are required to prepare a complete transfer pricing documentation file. If revenue is less than 50 billion VND and the total value of related-party transactions is less than 30 billion VND, the business is exempt from preparing transfer pricing documentation but must still fully complete Appendix I in accordance with Decree 132/2020/NĐ-CP.
No. The portion of interest expenses exceeding the 30% EBITDA threshold will not be deductible in the current period but may be carried forward for up to the next five years if the business still has remaining deduction capacity under the regulations. However, if not properly tracked, the business risks losing the right to carry forward these expenses.
Yes. If a loan meets both of the following conditions: it is at least 25% of the borrower’s equity and accounts for more than 50% of the borrower’s total medium- and long-term debt, then this relationship may be deemed a related-party transaction. This is one of the most common audit risks today.
The tax return may be filed late, but it must be submitted as soon as possible. According to regulations, an incomplete tax return resulting in a late filing will be subject to an interest rate of 0.03% per day and a fine ranging from 8 to 25 million, depending on the severity of the violation. If the tax authority determines that the incorrect filing has reduced the amount of tax due, the business will also be subject to back taxes, a fine of 20%, and late payment charges.
Businesses must be prepared to present their pricing documentation upon request by the tax authorities during audits or inspections. Failure to prepare such documentation prior to the audit will not be accepted as a valid reason and may result in the immediate assessment of taxes.
The highest priority is given to internal data—that is, independent transactions that occur directly within the company. Next is commercial data from accepted databases such as Orbis and TP Catalyst, and finally, public data from the financial reports of publicly traded companies. Data of unknown origin is often rejected by the tax authorities.
Businesses need to correctly identify related-party relationships from the outset, select an appropriate pricing method, accurately calculate EBITDA, maintain complete Local Files and Master Files, and ensure that the data in their accounting records, financial statements, and tax returns are in perfect alignment. This is a key factor in protecting the business during an audit.Are businesses with related-party transactions but low revenue required to prepare transfer pricing documentation?
Are interest expenses exceeding 30% EBITDA fully excluded when filing corporate income tax returns?
If a business borrows money from its CEO, is that considered a related-party transaction?
The tax filing deadline has passed, but the Related-Party Transactions Schedule was omitted from the return. Can I still file it retroactively?
When must the valuation report be submitted?
Which data sources should businesses prioritize when determining transfer pricing?
How can you reduce the risk of a tax assessment in related-party transactions?